Patrick McKenzie: evaluation

Transcript context

…Why are bank parking lots usually so empty? Oh, this is a straightforward result from queuing theory, if you can believe it. Queuing theory/operation science, by the way, tremendously under-understood by many people to whom it is professionally relevant, be that as it may. When you think of your typical stop-in at a bank, you go in, perhaps you deposit a check, perhaps you talk to the teller. You probably think, “I will have three minutes of dwell time.” So, you expect to be in and out. But the thing that the bank really wants to optimize for is new account opening. New account opening requires 30 to 60 minutes plus of dwell time, depending on what type of account you are opening. Then when you back out that variability, it turns out that gratuitously over-provisioning the parking space almost all of the time maximizes for not losing new account opening at a few very limited windows per year. Those very limited windows can make or break the branch’s ability to contribute to their larger financial institution. The number of accounts a bank actually opens per year in terms of checking accounts per branch — that is a number that one can have access to in various places. Depending on the bank and the locality, et cetera, it’s between 200 and 500. So, if you turn away a single customer or two customers in a row to open accounts because you had three parking spaces where you could have had seven, you’ve done a very outsized amount of damage to your financial institution, and thus over-provision the parking in all the places. I should infer that I shouldn’t keep much money in my checking account. That’s a correct inference from that? The margin for the bank must be fairly high, which means my return, all things considered, is relatively low.…

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